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Astera Labs Inc. (ALAB) is a fabless semiconductor company focusing on the design, manufacture, and marketing of semiconductor-based connectivity solutions aimed at AI and cloud infrastructure. Through their Intelligent Connectivity Platform, they offer solutions encompassing everything from high-speed connectivity integrated circuits (ICs), modules, and boards to embedded software for diagnostics, analytics, and security, as well as platform APIs for system monitoring and management. They partner with processor vendors, seasoned investors, world-class manufacturing companies, and cloud service providers to remove performance-based bottlenecks in compute-intensive workloads.
Incorporated in 2017, ALAB is situated at the heart of Silicon Valley in Santa Clara, California, and is a supplier for such massive tech giants as Nvidia (NVDA), Alphabet (GOOG), and Amazon (AMZN). Valued at $15.7 billion, the semiconductor stock is a newcomer to Wall Street, with its initial public offering (IPO) taking place as recently as March 2024.
ALAB priced its IPO at $36 per share, and after a brief dip back to those IPO levels back in August, the shares now trade at $94.49 - a staggering 160% return in three months. In fact, ALAB spiked 37.7% in a single session on Tuesday after a well-received quarterly earnings report.
Astera Labs Beats Q3 Estimates
Astera Labs reported its third-quarter results early this week, with adjusted EPS of $0.23 beating Wall Street’s $0.17 per share estimate. Revenue for the quarter surged 206% YoY to $113.1 million, easily outpacing analysts' $97.4 million estimates.
The company reported an adjusted gross margin of 77.8% and adjusted operating income of $36.6 million, translating into an operating margin of 32.4%. ALAB ended the quarter with a cash balance of $126.11 million.
Management also released stronger-than-forecast Q4 guidance, crediting a “new growth phase with multiple product families ramping across AI platforms.” They anticipate revenue in the range of $126 million to $130 million, which would be a 13% increase quarter-over-quarter, with adjusted gross margin projected at 75% and adjusted EPS between $0.25 and $0.26.
That blew away Wall Street's forecast, which called for Q4 adjusted EPS of $0.18 on revenue of $107.94 million.
Analysts See More Upside for ALAB Stock
Analysts have a consensus “Strong Buy” rating on ALAB stock, based on 11 analysts in coverage. And while the stock trades at a premium to its mean price target from this group, Wall Street has gotten significantly more bullish toward Astera Labs just this week.
After earnings, the mean price target has jumped all the way up to from $74.55 up to $90.64, and the single “Hold” rating on the stock has been raised to a “Buy.”
Evercore maintained its “Outperform” rating on the stock post-Q3, while increasing its target from $80 to $110, citing “another impressive beat and raise” quarter by Astera Labs as the impetus.
That's the new Street-high target for ALAB, which is now shared by JPMorgan after the firm's post-earnings bull note from analyst Harlan Sur, who wrote, “We believe Astera’s strong and expanding new product pipeline will continue to set a high bar for competitors."
Sur hiked his target price on ALAB from $70 to $110, which is about 16.4% north of Thursday's close.
On the date of publication, Ruchi Gupta did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
